Types of Joint Stock Company – Explained With Examples

There are different types of joint stock companies depending upon their goal, their design, their business model, their mission, vision, roles and stake holders. Each Joint stock company type has its own advantages and disadvantage because of many factors involved in different phases business cycle.

1. Chartered Company

The company which is incorporated by the royal order is called chartered company. Its power, rights and functions are governed by the charter, issued at the time of formation. But this type of Joint Stock company is not killed and formed in present days. Now all companies are registered under the company ordinance.

Examples

Chartered Mercantile Bank of India, Amsterdam Stock exchange, Chartered Bank of England, Muscovy Company.

2. Statutory Company

This type of Joint Stock company is formed by the order of Governor General President or Prime-Minister or by the special act of legislature. It is organized for the purpose of carrying on some business of national importance. The word “Limited” may not be used after the name of such company. Each company can exercise its particular power which is governed by the terms of its special Act.

Examples

3. Registered company

It is incorporated under the company act. In our country, there is ordinance 1984 to form and supervise the registered company. It possesses separate legal entity apart form its members.

Example

Registered company may be divide into the following groups:

  • Unlimited company.
  • Company limited by guarantee.
  • Company limited by Shares.

3.1 Unlimited Company

The shareholders of unlimited company are liable to pay the debts and other obligations of the business as in an ordinary partnership.

Features of Unlimited Joint Stock Company

  1. It is managed by the board of directions.
  2. It has separate legal entity.
  3. There may be large number of shareholders and
  4. Its shares may be transferred to another person.

But inspite of foregoing characteristics public do not like to form this type of company.

3.2 Company limited by guarantee

Where each member gives a guarantee to contribute a specified amount to the company on its winding up, such company is said to be limited by guarantee. It may or may not also have share capital. If such a company has share capital, the amount must be mentioned in the charter of the company. It is not formed to earn profit but the object of the company is to promote social, cultural and scientific activities such as clubs, chamber of commerce, welfare and educational association.

3.4 Company limited by shares

Where the liability of each member is limited to the nominal amount of the shares which he holds is called company limited by shares. If he pays the value of the shares, his liability will be nil. It is popular from different types of joint sock company. It may be classified into two groups i.e.

  • Public Company
  • Private Company

Public Company

To company which is formed by at least seven members and there are no restriction i.e.

  • for transferring of shares
  • for maximum numbers
  • for subscription of shares and debentures is called public company.

Under section 2 (30), “Public Company” means a company which is not a private company,

Private Company:

The company which is formed by at least two members and there are restrictions i.e. {Section 2 (28)}

  • for maximum number of members (not more than fifty)
  • for transferring of shares

for subscription of shares and debentures is known as private company.

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